Tuesday, September 27, 2016

Don’t Sleep On Your Savings: Avoiding Dormant Accounts

One of the best things you can do with a savings account is to forget about it and let it earn dividends. However, don’t forget about it so long that it becomes dormant. A dormant savings account is one that has had no activity in a while. While it varies by institution, generally accounts that have been inactive, no deposits or withdrawals made, for more than 2 years are considered dormant.

All dormant accounts cost financial institutions money since they are required to keep records of the account and send statements. Often, those statements are returned due to incorrect addresses and then require additional effort from the institution. These minimal costs add up when involving hundreds of accounts.

In Michigan, after three years of no activity, financial institutions are permitted to close these accounts and transfer the funds to the state treasury department through a process known as escheatment. State treasury departments hold those funds in an unclaimed property fund. This money isn’t lost, but it is difficult to access. To reclaim it, you must complete numerous forms and wait several weeks while your request is processed. It’s much harder than visiting your credit union!

Fortunately, there are steps you can take to avoid this.

1.) Keep track of your accounts.
You should always know where your money is. Money management apps let you monitor all your accounts in one place by combining them in one screen. This way, you’ll never risk dormancy by forgetting about an account.

If you prefer a physical approach, keep your account statements in a file folder and create your own ledger so that you have one place where you can see all your accounts.

2.) Automate your savings.
An account can’t go dormant if it’s getting transactions regularly, even if it’s only $5 a month. But who can remember to do that every month, or would want that burden?

To achieve this easily, set up automatic transfers between your primary account and your savings, even for a minimal amount. This form of automatic savings keeps your account active.

3.) Clean up and roll over old accounts.
If you create different accounts for different savings goals, you might accumulate a dozen accounts over time, some of which you’ll forget to close when they’ve served their purpose. Each of those accounts is at risk for dormancy!

One way to avoid this is to make a general-purpose savings account and consolidate your funds there once every few months. Use that money for any purpose – anything is better than taking the risk of it being lost.

If you haven’t checked your Community Financial account in a while or need to update an address on file we are here for you! Act before it’s too late; clean up your dormant accounts today!